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By Annie LowreyTHE NEW YORK TIMES • Wednesday May 14, 2014 2:10 AM

WASHINGTON — The federal overseer of Fannie Mae and Freddie Mac announced policies yesterday
that would maintain the mortgage giants’ role in parts of the housing market, spur more home
lending and aid distressed homeowners.

The announcement is a significant shift in strategy for the mortgage financiers, driven by the
new director of the Federal Housing Finance Agency, Melvin Watt.

“Our overriding objective is to ensure that there is broad liquidity in the housing-finance
market and to do so in a way that is safe and sound,” Watt said at the Brookings Institution in
Washington.

Watt announced a number of changes for Fannie and Freddie, changes that would perpetuate the two
government-sponsored enterprises’ presence in mortgage finance, rather than shrinking it.

Fannie and Freddie — which back about two-thirds of new mortgages — will keep current limits on
the size of loans they guarantee, rather than reducing those limits, as previously proposed.

“This decision is motivated by concerns about how such a reduction could adversely impact the
health of the current housing-finance market,” Watt said.

The new director also loosened rules that obligated banks to “buy back” distressed loans. Watt
said the mortgage financiers will now allow two delinquent payments in the first 36 months after
their acquisition of a loan, and that they would eliminate “automatic repurchases when a loan’s
primary mortgage insurance is rescinded.”